The stock market rally squad was out again last week to the extent the S&P 500, Dow Jones Industrial Average, Nasdaq Composite, and the Value Line Index all hit their best levels since March 2009. But given the ongoing failure of Cumulative Volume to confirm any of the strength in any of the major indexes, we wonder if buying at some point could turn out to be a Pyrrhic victory. In addition, while options buyers continue willing to bid up call prices at the expense of put premiums as reflected in our Call/Put Dollar Value Flow Line (CPFL), and even though NYSE Up/Down Volume made new highs relative to the July lows, that latter series has yet to exceed its late April 2010 highs. At the same time, the NYSE Advance/Decline Line has faltered below the early November plot highs while our proprietary Volatility Ratio is now as overheated on the Intermediate-term Cycle as at any time over the past 20 years. It is also important to remember that strength since March 2009 has not developed within a bubble. Gains since that spring 2009 bottom have occurred in the wake of a severe decline that followed the October 2007 highs. Put another way, lacking strength above those 2007 highs (1576.09—S&P 500 index, 14198.10—Dow 30, and Nasdaq Composite 2861.51), buying since March 2009 could prove to be nothing more than a bear market retracement. While some may suggest that investing in the Value Line Index is the way investors should have gone since that index has bettered its October 2007 highs by over 13%, it’s also true that same index lost nearly 60% of its market value from October 2007 through early March 2009. It could even be pointed out that the Nasdaq Composite at 2642.97 last Friday only has to rally a bit more than 8% to make new highs along with Value Line. To such revelations we might suggest that instead of the Value Line or the Nasdaq, the prescient investor should have purchased Gold futures which have more than doubled since March 2009. Or how about Apple computer (AAPL) which has rallied over 300% in the same time frame. And then there’s the big Kahuna rally in Netflix (NFLX) which appreciated from nearly $18 in October 2008 to nearly $210 per share recently for a gain of over 1,000%. Coulda, shoulda, woulda are not investment strategies. At some point an investor must make strategic choices otherwise market "participation" will remain amorphous. Retrospect may cause wisdom, but it may not create future wealth. In fact, the only way an investor can participate in the investment world is to buy something, sometime. And the profitability of that purchase will be determined by whether or not the investor buys during an up cycle or a down cycle. Same for selling. For someone who bought the Dow in October 2007 and who is now still long crying towels remain in order because of a lingering net loss of nearly 20%. If the same investor had bought the Value Line Index in October 2007, he would be up 13% or just under 4.5%. That gain is hardly reason to get out the hats and horns.

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